22 minute read
Regional Report
add to Double E’s existing line of critical converting products.
BTG boosts Industry 4.0 efforts with virtually connected sensors launch
BTG has announced that all its sensors are now supplied with the bCONNECTTM module, allowing them to be virtually connected and attaining all the benefits of Industry 4.0.
The company said that bCONNECT is an “edge technology, enabling application experts to have cloud-connectivity and remote access to diagnose problems, permitting near-immediate identification of measurement or calibration issues and enhancement of predictive maintenance functionalities”.
With these capabilities, BTG is able to further increase the availability and capability of all its sensors. Dan Smith, Global Business Director for Process Solutions, said: “Reliable and available process measurement is vital to building any successful digital programme.
“This innovation further supports our customers’ ability to extract value from digitalisation efforts”.
BTG launches Yankee refreshment blade
BTG has introduced its PROcleanTM Yankee Dryer refreshment blade into the tissue market.
The company said the blade is made of advanced composite material and is designed to quickly and safely clean hard organic coating from the Yankee surface and can be used in any sheet-off condition including at speed and higher temperatures.
It said: “Benefits reported include significantly reduced vibration, reduced edge build up, and less web break and
The MTC ITF Change: Körber Business Area Tissue’s latest folding head.
sheet defects.
“Used regularly as part of a Yankee surface management programme it is an effective tool against Yankee chatter and will extend regrind intervals, especially when used with the complimentary VigilancePROTM Yankee performance monitoring and PROfileTM blade holder service solutions.”
Körber presents MTC ITF Change folding head
Körber Business Area Tissue has introduced its latest folding head capable of changing a product’s cut off.
The MTC ITF Change is the company’s latest machine used in the production of interfolded products where it can change the cut-off format of the product simply by replacing the cassette.
Körber Business Area Tissue said it is its first folding head capable of modifying the cut off of the product.
It said: “By replacing a single cassette it is possible to change the cut format in a simple, fast, and automated way without compromising the quality of the finished product.
“MTC ITF Change is the ideal solution for companies that need to develop interfolded sheets of different lengths without losing OEE.”
Kruger’s pulp boost: The Kamloops facility in British Columbia manufactures NBSK and unbleached softwood kraft pulp.
CANADA
Kruger confirms Kamloops pulp mill purchase; boosts NBSK and unbleached softwood kraft pulp capacity
Kruger affiliate Kruger Specialty Papers Holding has completed the acquisition of Domtar’s pulp mill in Kamloops, British Columbia.
The Kamloops facility manufactures NBSK and unbleached softwood kraft pulp and will continue to operate as usual.
The mill’s 320 jobs will be maintained and additionally, Kruger will maintain ongoing initiatives to continue modernising the plant. François D’Amours, Kruger’s Executive Vice President and Chief Operating Officer, said: “Kamloops is a world-class facility and a natural fit for Kruger.
“Over the coming weeks we will focus on strengthening relationships with the mill’s existing customers, suppliers, and business partners, as well as with the local community.”
The acquisition will also enable Kruger to secure the supply of high-quality pulp for some of its paper mills, including those in Quebec, where the company is investing about $1bn for the construction of two state-of-the-art tissue plants.
Zeus acquires Canadian distributor AgriFlex
Irish-owned Zeus has acquired Canadian agricultural supply business Agri-Flex.
Established in 1995, Agri-Flex supplies crop packaging products and horticultural consumables to the Canadian agricultural market, with sales exceeding $14m per annum.
The acquisition marks the next phase of Zeus’s €35m investment strategy, after it acquired Ireland-based Limerick Packaging in October 2021.
In February 2021, Zeus concluded a previous two-year long €40m investment programme, which saw it acquire seven companies including Austrian company Petruzalek, Dublin-based Essential Supplies and tissue manufacturer Aldar Tissues.
CHINA
Lee & Man Group to upgrade Jiangxi plant and increase production of high-quality products
Jiangxi Lee & Man Sanitary Paper Manufacturing has announced plans to upgrade its high-speed crescent paper machine to increase its production of highquality products.
Supplied by Baosuo Enterprise Group’s Baotuo division, the company will provide energy-saving upgrades for the plant’s 5.6m, 2200m/min tissue machine.
According to the machinery supplier the project will include the improvement of product quality, reducing energy consumption, and improving the production environment.
The aim is to then respond to customer demand for higher-quality products produced with higher energy efficiency, reduced emissions and increased production.
Sun Paper boosts production capacity
Sun Paper has increased its production capacity after starting up key pulping process equipment at its new pulp mill Guangxi Sun Paper in Beihai.
Supplied by Andritz, the scope of supply includes a wet lap system with two production lines for a capacity of 1,120 admt/d bleached hardwood kraft pulp, each consisting of a Twin Wire and a Heavy-Duty Press for pulp dewatering, a cutter-layboy, and a baling line.
According to Andritz, the wet lap system has the highest capacity ever installed in China.
The investment also includes a white liquor plant with a capacity of 10,500 m3/d comprising major recausticising equipment and an Andritz LimeKiln with a capacity of 950tpd.
USA
GP announces $50m investment at Muskogee plant
Georgia-Pacific (GP) has announced it will invest $50m to upgrade its Muskogee, Oklahoma-based bath tissue, towel and napkin manufacturing facility.
Updates at the 640-acre site will take place over the next three years and will add to equipment and will also include a new production line.
A GP spokeswoman told TWM: “The amount and upgrades referenced are an aggregate of several investment projects during the next two years. “We are not sharing any additional details about the projects.”
FROM A LOW BASE, BOTH COUNTRIES ARE DEVELOPING A ROBUST CONSUMER-DRIVEN PRODUCT ECONOMY THAT INCLUDES INCREASING TISSUE CONSUMPTION APPROACHING THE EU AVERAGE
Fisher International’s data does not yet attempt any assessment of the potential impact of the war in Ukraine on supply chains and energy costs across the region which includes Poland and Romania. It does, however, include objective speculation on the shorterterm prospects for tissue in those two countries.
oland has a rich history detailing all
Pthe way back to the 10th century until it was partitioned by Russia, Austria, and Prussia in 1795. However, Poland regained independence after WWI in 1918, but then suffered greatly at the beginning of WWII with the invasion and occupation by Germany and initially the Soviet Union. Post-war, Poland was controlled by the Soviet Union until the “Solidarity Labour Movement” began to shake them loose from Soviet control.
Poland’s transformation into an economic leader began with free elections in 1989, and now Poland is the sixth largest economy in the European Union (it joined in 2004) with a robust tissue business, including tissue mills and tissue equipment fabrication.
However, Poland's economy faces several challenges, including transportation infrastructure and a rigid labour code, which has resulted in more younger Poles immigrating to other EU member states.
Lands in Romania, on the other hand, were held by the Turkish Ottoman Empire until 1859, which then united as Romania in 1862, and gained recognition of independence at the end of WWI. However, the Soviet Union occupied Romania after initially aligning with Germany, and The Soviet’s domination under a local dictator continued for decades until the dictator was overthrown in 1989, and a non-communist government was established in 1996.
Romania joined NATO in 2004 and the EU in 2007. Economic growth rebounded from 2013 to 2017, driven by strong industrial exports and agricultural harvests, but was hampered by an aging population and immigration of skilled labour to other EU countries.
Poland's recent population trend is shown in the blue bars in Figure 1 (note that we will continue to use the blue colour to represent Poland and the yellow bars
Bruce Janda
Senior Consultant, Fisher International
to represent Romania). Poland's overall population is trending down at -0.26% in 2022 for a current estimated total of 38,093,101.
Romania's recent population, represented as the yellow bars in Figure 1, is trending down at -1.09% in 2022 for a current estimated total of 18,519,899.
Poland and Romania have been experiencing the slow rise of inflation over this study period. Figure 2 shows the relative inflation as an index of 100 for the base year 2010. Poland's inflation rate was 2.1%, and Romania's inflation was 3.8% in 2019.
Note that the yellow (Romania) index bars are outpacing the blue (Poland). These figures do not include the expected sharper inflation anticipated rates due to the 2022 global supply issues from Covid-19 and energy costs increases from the Russian invasion of Ukraine.
Figure 3 shows the trend of adjusted real GDP growth for Poland and Romania as GDP per capita that can be directly compared on the same scale. Romanians are slightly behind the Poles in personal purchasing power. Poland's overall Real GDP was $1,223 billion in 2020, with a growth rate of
Figure 2: Poland and Romania Inflation Trend Figure 3: Poland and Romania's GDP (adjusted) per Capita
Figure 4: Poland and Romania's Unemployment Figure 5: Poland and Romania Tissue Machine Count Trend
Figure 6: Poland Tissue Imports Trend
4.55% in 2019. Romania's real GDP was $556 billion in 2020, with a growth rate of 4.2% in 2019.
The unemployment rate for both countries is shown in Figure 4. Both countries recovered from the Great Recession, but Romania has seen an upward trend in the past five years that has not affected Poland. Poland also reported unemployment of 10.8% youths (ages 15-24), while Romania is higher at 17.3%.
These economic statistics show relatively flat populations with rising per capita incomes. Poland appears to be ahead of Romania in industrial development. Still, both countries are starting from a low
POLAND AND ROMANIA HAVE BEEN GROWING AND UPGRADING THEIR TISSUE MACHINE FLEETS AS SHOWN IN FIGURE 5. POLAND HAS MADE THE MOST CHANGES BY ADDING FIVE MACHINES AND REMOVING 10 OVER THE PERIOD THE STUDY WAS CONDUCTED. THIS NET LOSS IN THE NUMBER OF MACHINE UNITS MASKS AN INCREASE IN TOTAL CAPACITY AS SMALL, OLDER MACHINES ARE REPLACED WITH LARGER, MORE MODERN MACHINES.
point in 1990 in developing a consumer-driven product economy that includes increasing tissue consumption. There is room to grow as domestic tissue consumption approaches the average per capita of the European Union.
Poland and Romania have been growing and upgrading their tissue machine fleets as shown in Figure 5. Poland has made the most changes by adding five machines and removing 10 over the period the study was conducted. This net loss in the number of machine units masks an increase in total capacity as small, older machines are replaced with larger, more modern machines.
Romania has added four machines while removing two over the same time frame. As a result, Romania tends to have newer yet smaller machines.
Poland's tissue imports are shown in Figure 6, with the top 10 countries shown as stacked bars. Germany is the leading supplier of imported tissue to Poland, but volumes decrease as Poland's tissue production increases.
Romania's tissue imports are comparable to Poland, with Germany as the key supplier, as shown in Figure 7. In addition, both Romania and Poland show limited sourced tissue from Indonesia in the last several years. Poland's tissue export trend is illustrated in Figure 8, and again, Germany is the largest trade partner. Poland's overall tissue export volume has grown beyond its tissue imports, making Poland a net tissue exporter.
Romania's tissue export trend is shown in Figure 9, with Hungary as the leading tissue customer. However, the volume is much more fragmented than the Polish tissue business. Nevertheless, Romania remains a net tissue importer.
Figure 10 provides a view of the Polish tissue business with capacity shares shown for each producing country. There are two companies with large shares that account for more than half of the capacity, three moderate share companies, and about 13 smaller share companies. These companies are locally based and include French, German, and Swedish companies.
Romania's tissue capacity is less fragmented, as shown in Figure 11, but one company has almost 50% of the total tissue capacity. In addition, there is at least one foreign-owned company (French) in Romania.
The majority of Poland's fibre comes from imported bleach kraft market pulp consisting of eucalyptus, northern hardwood, northern softwood, and southern softwood. Recovered papers make up less than a quarter of the total fibre furnish, as shown in Figure 12.
Romania's fibre sources are shown in Figure 13. Here, recovered papers make up slightly more than a quarter of the total fibre furnish. Kraft bleached market pulps include northern hardwood and softwood with tropical hardwoods other than eucalyptus.
Poland's tissue production is about half consumer bath tissue and a third of the total consumer towels. Commercial hand towels make up the next largest segment. Poland is well known for its industrial demand for hand cleaning products.
Romania's tissue production mix is shown in Figure 15. Consumer bath tissue makes up an even greater percentage than in Poland. Consumer towel is the second-largest product, but it represents a smaller portion of Romania's total. This suggests that Romanian consumer demand is slightly less advanced than in Poland. The amount of commercial bath tissue versus commercial towelling is surprising.
Poland also has some advanced tissue capability to make wettexturised products. These are primarily focused on consumer bath and towelling, as shown in Figure 16.
Figure 7: Romania Tissue Imports Trend
Figure 8: Poland Tissue Exports Trend
Figure 9: Romania Tissue Exports Trend
Figure 11: Romania Tissue Producer Capacity Share, mock-up
Figure 12: Poland Tissue Fibre Sources Figure 15: Romania Tissue Products
Figure 16: Poland Advanced Tissue Products
Figure 13: Romania Tissue Fibre Sources
Figure 17 provides an assessment of the average tissue machine quality in Poland and Romania compared to several well-known tissue exporting and importing Western European countries and Turkey. The X-axis of the bubble chart shows the average tissue machine technical age, while the Y-axis shows the average machine wire width. This provides an idea of machine size, productivity, and quality.
The bubbles' size represents the relative total tissue production capacity for each country in the comparison. Turkey has the most modern and highest capacity tissue machines in the group. Whereas Romania's tissue machines tend to be relatively up to date, but are very narrow, indicating low capacity per machine. Poland's technology and size compare well with Italy, but at a significantly lower overall national capacity.
This comparative analysis is continued in Figure 18, showing the average total cash cost of production per tonne for the same group of countries with no significant overall advantages. These total costs are relatively equivalent but show substantial differences in the cost components. Turkey has high virgin fibre import costs, most
AS TISSUE IMPORTS CONTINUE TO EXCEED ITS EXPORTS, ROMANIA'S TISSUE MANUFACTURING SECTOR CAPACITY IS LESS THAN THE TOTAL TISSUE DEMAND. POLAND'S TISSUE MANUFACTURING IS MORE ADVANCED, INCLUDING NEW ADVANCED TISSUE TECHNOLOGY FOR TEXTURISED TISSUE AND IS ABLE TO SUPPORT NET TISSUE EXPORTS. POLAND ALSO HAS MORE INVESTMENT FROM INTERNATIONAL TISSUE-MAKING COMPANIES, AND POLAND'S FRAGMENTED TISSUE MARKET SUGGESTS THAT THERE IS ROOM FOR INDUSTRY CONSOLIDATION.
likely due to currency exchange costs; the United Kingdom's energy costs are about twice the cost per tonne of the others; France and Germany show high labour costs; Germany uses more recovered and recycled fibre in tissue; and both Romania and Poland have lower labour costs but are still higher than Turkey.
As Poland and Romania's tissue businesses look west to the rest of the European Union, carbon emissions per tonne will become an increasing concern.
The FisherSolve Next Carbon Benchmark model allows the evaluation of a product or site by both cradle-to-gate and gateto-gate carbon emissions. It also provides the direct calculation of Scope 1, 2, or 3 emissions used in many carbon accounting regulations. Figure 19 shows the Scope 2 carbon emissions of each comparison company as that is the most significant difference between them.
France has the lowest Scope 2 emissions due to its carbon-free nuclear power. Romania is in the middle of the group, but Poland is an outlier due to coal's heavy power grid use. This is expected to become a significant factor hindering the growth of Poland's tissue exports to other EU markets.
Poland and Romania have grown their domestic tissue consumption and production over the past two decades as the countries developed free and market-based economies. However, they are both losing populations due, in part, to the departure of skilled workers and young people moving to other EU countries. Both countries have room to grow the consumer use of tissue products At-Home and AfH.
As tissue imports continue to exceed its exports, Romania's tissue manufacturing sector capacity is less than the total tissue demand. Poland's tissue manufacturing is more advanced, including new advanced tissue technology for texturised tissue and is able to support net tissue exports. Poland also has more investment from international tissue-making companies, and Poland's fragmented tissue market suggests that there is room for industry consolidation.
Other than the enormous carbon footprint of Poland's tissue manufacturing due to grid power generation, both countries' tissue manufacturing should be viable for the future as they look for continued integration with the European Union.
However, none of the factors discussed or data used in this analysis take the most recent events impacting the global economy into account. The continued global supply constraints and rapidly spreading inflation will influence tissue operating costs.
The Russian-Ukraine conflict puts both Poland and Romania on the front-line regarding risk to their economies and energy supplies. Energy prices have spiked across Europe, and while Poland has access to ocean LNG shipments, Romania is landlocked.
Both countries will need to look for adaptations to on-site and purchased energy supply to manage cost and carbon emissions versus the rest of the European Union.
Analysis of competitive position requires specifics on tissue producers and individual machines. This article presents a static summary of Poland and Romania's tissue industries today.
Fibre prices, exchange rates and environmental regulations will change, providing some participants with advantages and new challenges. In addition, Poland and Romania's tissue mills will continue to change hands and consolidate, and neighbouring countries may invest in tissue-making capacity, affecting Poland's and Romania's imports and exports.
Figure 17: Poland and Romanian Tissue Machine Average Quality
Figure 18: Tissue Machine Cost Benchmark
Figure 19: Tissue Machine Scope 2 Carbon Dioxide Emissions Benchmark
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RETAIL TISSUE IN POLAND AND ROMANIA – FUTURE PREDICTIONS FOR AN UNPREDICTABLE ENVIRONMENT
Two countries sharing many similarities, and as with the rest of Europe facing the many uncertainties for consumers and manufacturers in the years ahead. Euromonitor International’s Senior Research Analyst Per Brandberg forecasts how the region’s tissue market will take on a rapidly changing economic climate.
Per Brandberg
Senior Research Analyst, Euromonitor International
It is difficult to imagine that there has been a more volatile time to discuss forecasts and prospects for tissue (and any other FMCG category, for that matter) in Eastern Europe than right now. Personally, I have previously struggled with the concept that the medium-term horizon is typically five years, but now forecasting more than five months ahead seems like folly, and for good reason. For Poland and Romania, there is much to link them to each other as well as to the broader EU in terms of the pressures they are facing and the slew of “known unknowns” impacting consumers now and likely well into the future.
Inflationary pressures
Embedded economy-wide inflation is the long-term risk, already set to run to 8% for 2022 (at the time of writing) in Romania and 7.5% in Poland over the same period.
While these are not the highest figures in the region, they are relative to the economic situation found on the ground. In Poland 2022 inflation levels are well above anything that has been experienced since 2000, before accession to the EU. We know this is both significant now and unlikely to evaporate in 2023, according to central bank sources. For consumers, the impact of general price inflation, rising fuel prices and the impact of the Zloty’s falling value on import pricing is having a significant effect on consumption and the destination of disposable income. These factors force choices for many households; faced with what the Polish central bank describes as the “absolutely brutal” increase in food prices, choices around household expenditure rationalisation will logically follow.
On an expenditure basis, the situation in Romania looks potentially more severe given the higher proportion that food makes up of average expenditure, meaning consumers will be pushed to commoditise within food expenditure and beyond into other categories, which is an area which will necessarily impact retail as well as institutional (AfH) tissue category sales. Consumers economising, making do and displaying wholesale retreat from some retail categories is how FMCG experience inflation.
% Consumer Expenditure by Key Categories, Poland 2021
Food & Drink Housing Transport Household Goods & Services Other
Rapid demographic change
Both Poland and Romania have also experienced a profound demographic change because of the ongoing war in Ukraine, which is significant for tissue category performance as it is intrinsically linked to population and income.
While inflation is squeezing incomes, on the population metric both countries have experienced an unprecedented level of population change. Both have taken in a huge number of refugees: Poland, for example, is estimated to have taken some 2.5m, which represents 6.5% growth in its population in just a few months. For Romania, 750,000 refugees represent a 4% population surge over the same period.
This is an unprecedented level of change, and while it does expand the consumer base for core tissue categories like toilet paper, it also has a counter influence on national consumption as it also has its own influence on demand for housing and therefore cost. This is true of the recent growth in demand but also comes against a background of higher interest rates associated with economies trying to get to grips with inflation.
This is a complex situation, and no-one has any reliable idea as to how long any of it will last or its longer-term impact on either economy, employment, and the very real threat of recession and even stagflation in the wider European economy. Although earlier predictions tracking consumption as it relates to income will continue to be a reliable indicator of relative tissue consumption in more “normal” times, such is the level of disruption that any downward impact on overall disposable income levels is very likely to have a more pronounced downward influence on tissue consumption in both volume and value terms, although households will necessarily look to mitigate this.
Disposable income and per capita tissue consumption: a balance of income and consumer confidence
The wider socioeconomic situation does not bode particularly well for tissue products to live up to the longer-term optimistic outlook we had in autumn 2021. Indeed, the tissue industry, like others, has its own set of inflationary pressures. Heavy on raw material, transportation and processing energy costs, the tissue industry is exhibiting strong inflationary pricing pressures in 2022 in both Poland and Romania, which is expanding faster than the economy-wide consumer price inflation.
THE WIDER SOCIOECONOMIC SITUATION DOES NOT BODE PARTICULARLY WELL FOR TISSUE PRODUCTS TO LIVE UP TO THE LONGER-TERM OPTIMISTIC OUTLOOK WE HAD IN AUTUMN 2021. INDEED, THE TISSUE INDUSTRY, LIKE OTHERS, HAS ITS OWN SET OF INFLATIONARY PRESSURES. HEAVY ON RAW MATERIAL, TRANSPORTATION AND PROCESSING ENERGY COSTS, THE TISSUE INDUSTRY IS EXHIBITING STRONG INFLATIONARY PRICING PRESSURES IN 2022 IN BOTH POLAND AND ROMANIA, WHICH IS EXPANDING FASTER THAN THE ECONOMY-WIDE CONSUMER PRICE INFLATION.
% Consumer Expenditure by Key Categories, Romania 2021
Food & Drink Housing Transport Household Goods & Services Other
Source: Euromonitor International
Source: Euromonitor International
Source: Euromonitor International
Tissue-specific price rises
Looking at retail tissue products in Poland, the median price grew on average by 20% from the beginning of the year until 16 May 2022, according to Euromonitor International’s Via pricing database. Looking further into this growth spike, some of the biggest brands within retail tissue in Poland are exhibiting strong growth in median prices across the board, with Velvet (a leading 20% market value share, 2021) witnessing 15% median price growth and Regina (second positioned with an 11% market value share, 2021) experiencing 10% median price growth so far in 2022.
